Haven't Heard of Hudson City Bank? Now You Might

As employees of Lehman Brothers emptied out their desks, as big banks crumbled and Wall Street threatened to bring down Main Street, there was a little bank that quietly moved forward and watched its status rise.

Looking over the most recent ranking of banks and savings and loans, Ron Hermance, president and CEO of Hudson City Bank, pointed out his bank's status. With the demise of Wachovia and Washington Mutual, Hudson City is moving up the list.

"Citigroup became No. 1, Bank of America No. 2, JPMorgan Chase, No. 3. That puts us at No. 11 on old figures," Hermance said. "But I can tell you on newer figures through June we'd probably be No. 8."

A New Philosophy

More than just a river separates Hudson City Bank from the big boys of Wall Street. There's a difference in philosophy too.

"First of all, you have to operate with two fundamental strengths," he explained. "It goes back to Vince Lombardi football. We do two things well: block and tackle. ... We underwrite every loan, and our operating efficiency is very low."

Hudson City has been around for 140 years. It operates 125 branches in New York, New Jersey and Connecticut. The secret to success? A small-town feel and playing it safe. It does only two things -- take in deposits and make mortgages.

"Nothing has changed in the way we underwrite loans or do business, it's absolutely the same," said Hermance. "So in other words, we still look at every application and underwrite it one at a time.

"We have 80,000 mortgages at this point," he said. "And as of June 30 we had 328 that are on nonaccrual, which comes out to about .25 percent of our portfolio."

This means a very small delinquent rate.

Bank Thrives on Good Management

That means that of those 80,000 loans, 23 are in foreclosure. The bank's low default loan record is due, in part, to its thorough screening process.

Applicants are more than just a credit score. At a time when other banks were creating "exotic" mortgages -- requiring no income verification, no down payment and other "exotic" products, Hudson City was rigorous in requiring full documentation and no less than a 10 or 20 percent down payment. Many customers, Hermance said, chose to put down more.

"They really don't have to," he said. "It's their doing. They've come here because they like the rates and they like the service and ... they don't have to call some other state to handle their mortgage. They can walk into a branch. They can call a branch on the phone. It's still a high-touch service item.

Earlier this year, Forbes magazine named Hudson City the best managed bank of 2007, and it has also received the stamp of approval from Jim Cramer, host of MSNBC's "Mad Money."

Recently, Cramer has compared the quiet, unassuming Hermance to the George Bailey character in the Frank Capra classic "It's a Wonderful Life."

Hermance said he's just focused -- slow and steady wins the race.

"Let everybody else do what they're going to do," he said.

Low risk and a return to traditional banking -- it harkens back to the days when knowing your local banker was the norm, and at Hudson City, it remains that way.

"It's like family," said Eleanor Chenel. "I came in the other day, didn't have any proof, but Kari Harrison [the branch manager] helped me out. She knows who I am. It's great when you can walk in. It's like family."